Strongly rising asset prices after March 2020 in the euro area and the United States are hard to explain using conventional asset pricing approaches. We apply Liquidity Preference Theory to examine the consequences of the unprecedented Covid-related growth of household deposits. Following the shock, deposits were spent, hoarded, or invested depending on liquidity preferences (Keynes, 1936; Tobin 1969). The allocation of the deposit shock was mediated by income distribution, corporate financial dynamics and the price inelastic response of financial and real estate asset markets, combined with the elasticity of the financial system (Borio and Disyatat 2011; Gabaix and Koijen 2022). Stability of liquidity preferences was evidenced by the fact that, just as before the pandemic, every additional Euro or Dollar in monetary wealth during the pandemic came to be reflected in around six Euros or ten Dollars in non-monetary wealth, mainly equities and housing. This suggests portfolio rebalancing is the major explanation of the strong rise in asset prices after the onset of the pandemic.